Thirty-six highly paid employees have threatened to sue if benefits were not based on full salaries. The UC president and the regents board chairman support the $245,000 limit.

The University of California system's two top leaders on Tuesday rejected a politically controversial demand by some of the university's most highly paid employees that they should receive larger pensions, based on a percentage of their total salaries, not on just the first $245,000.

The dispute comes weeks after UC bolstered its long underfunded retirement plans by cutting benefits for all employees and raising the minimum retirement age from 50 to 55 for those hired after 2013.

Last month, 36 UC executives threatened legal action if the university did not honor what they contend was a promise to allow pensions to be based on a percentage of full salaries, not on the $245,000 limit previously set by federal tax rules. Their claims, which could affect about 200 employees and cost an estimated $90 million over many years, have triggered outrage among unions and state legislators grappling with a worsening state budget.

On Tuesday, UC President Mark G. Yudof and regents board chairman Russell Gould responded publicly to the demand, saying that the university was not obligated to provide the pension boost. They said the university had retained attorneys in case of a lawsuit.

"These are valuable employees, but I think they have misread the situation," Gould said of the three dozen top administrators, deans and others who signed a Dec. 9 letter to Yudof. "We certainly don't feel there is an obligation." And granting the increase, he said, "would be another hit on the pension fund."

The regents are expected to discuss the matter at their regular meeting later this month, but labor unions, students and other UC critics are all but certain to protest any pension increase. "Quite frankly, I don't see any traction [for it] among the regents," the board chairman said.

In their letter, the executives said they understood "current political sensitivities" but argued that not boosting the pensions would hurt UC's ability to recruit top administrators and break what they called a commitment from previous UC leaders. They warned of a costly legal fight and said the issue could undermine the university's reputation as a good-faith employer and demoralize its senior leaders.

Those who signed the letter, details of which were first published by the San Francisco Chronicle, included Christopher Edley, UC Berkeley law school dean; David Feinberg, UCLA hospitals chief executive; Judy Olian, UCLA Anderson School of Management dean; Franklin Gilliam Jr., dean of the UCLA School of Public Affairs; Jack Stobo, UC system senior vice president for health services; and John Plotts, UC San Francisco senior vice chancellor.

Several who signed the document declined to comment Tuesday. Others could not be reached.

Gilliam said he would not benefit personally by any increase because UC policy grandfathered in employees who were hired before 1994 at a somewhat higher pension cap and because his salary, in any case, is $245,000. But he said he signed the letter, despite the bad economic timing, because he worried that without the pension boost, the university would lose out to schools like Harvard and the University of Texas in recruiting battles and would no longer be "a world-class university system."